S.Amdt. 635

1. 1

   Change 1: Replaces “$75,000” with “$82,500”

   ReplacesPage 15, line 8Printed page

   In S. 1054 · Placed on Calendar Senate

   (a) In General.--Paragraph (1) of section 179(b) (relating to dollar limitation) is amended to read as follows:

   "(1) Dollar limitation.--The aggregate cost which may be taken into account under subsection (a) for any taxable year shall not exceed [struck: $75,000][inserted: $82,500].".

   (b) Increase in Qualifying Investment at Which Phaseout Begins.-- Paragraph (2) of section 179(b) (relating to reduction in limitation) is amended by striking "$200,000" and inserting "$325,000".

   Original wording

   On page 15, line 8, strike “$75,000” and insert “$82,500”.

2. 2

   Change 2: Rewrites section 342 of section 341

   Replaces

   Removes section 342 of section 341.

   Inserted: SEC. 341. PREVENTION OF CORPORATE EXPATRIATION TO AVOID UNITED STATES INCOME TAX.

   Inserted: (a) In General.--Paragraph (4) of section 7701(a) (defining domestic) is amended to read as follows:

   Inserted: "(4) Domestic.--

   Inserted: "(A) In general.--Except as provided in subparagraph (B), the term 'domestic' when applied to a corporation or partnership means created or organized in the United States or under the law of the United States or of any State unless, in the case of a partnership, the Secretary provides otherwise by regulations.

   Inserted: "(B) Certain corporations treated as domestic.--

   Inserted: "(i) In general.--The acquiring corporation in a corporate expatriation transaction shall be treated as a domestic corporation.

   Inserted: "(ii) Corporate expatriation transaction.--For purposes of this subparagraph, the term 'corporate expatriation transaction' means any transaction if--

   Inserted: "(I) a nominally foreign corporation (referred to in this subparagraph as the 'acquiring corporation') acquires, as a result of such transaction, directly or indirectly substantially all of the properties held directly or indirectly by a domestic corporation, and

   Inserted: "(II) immediately after the transaction, more than 80 percent of the stock (by vote or value) of the acquiring corporation is held by former shareholders of the domestic corporation by reason of holding stock in the domestic corporation.

   Inserted: "(iii) Lower stock ownership requirement in certain cases.--Subclause (II) of clause (ii) shall be applied by substituting '50 percent' for '80 percent' with respect to any nominally foreign corporation if--

   Inserted: "(I) such corporation does not have substantial business activities (when compared to the total business activities of the expanded affiliated group) in the foreign country in which or under the law of which the corporation is created or organized, and

   Inserted: "(II) the stock of the corporation is publicly traded and the principal market for the public trading of such stock is in the United States.

   Show 63 more inserted paragraphsShow less

   Inserted: "(iv) Partnership transactions.--The term 'corporate expatriation transaction' includes any transaction if--

   Inserted: "(I) a nominally foreign corporation (referred to in this subparagraph as the 'acquiring corporation') acquires, as a result of such transaction, directly or indirectly properties constituting a trade or business of a domestic partnership,

   Inserted: "(II) immediately after the transaction, more than 80 percent of the stock (by vote or value) of the acquiring corporation is held by former partners of the domestic partnership or related foreign partnerships (determined without regard to stock of the acquiring corporation which is sold in a public offering related to the transaction), and

   Inserted: "(III) the acquiring corporation meets the requirements of subclauses (I) and (II) of clause (iii).

   Inserted: "(v) Special rules.--For purposes of this subparagraph--

   Inserted: "(I) a series of related transactions shall be treated as 1 transaction, and

   Inserted: "(II) stock held by members of the expanded affiliated group which includes the acquiring corporation shall not be taken into account in determining ownership.

   Inserted: "(vi) Other definitions.--For purposes of this subparagraph--

   Inserted: "(I) Nominally foreign corporation.--The term 'nominally foreign corporation' means any corporation which would (but for this subparagraph) be treated as a foreign corporation.

   Inserted: "(II) Expanded affiliated group.--The term 'expanded affiliated group' means an affiliated group (as defined in section 1504(a) without regard to section 1504(b)).

   Inserted: "(III) Related foreign partnership.--A foreign partnership is related to a domestic partnership if they are under common control (within the meaning of section 482), or they shared the same trademark or tradename."

   Inserted: (b) Effective Dates.--

   Inserted: (1) In general.--The amendment made by this section shall apply to corporate expatriation transactions completed after September 11, 2001.

   Inserted: (2) Special rule.--The amendment made by this section shall also apply to corporate expatriation transactions completed on or before September 11, 2001, but only with respect to taxable years of the acquiring corporation beginning after December 31, 2003.

   Inserted: SEC. 342. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS.

   Inserted: (a) In General.--Subtitle D is amended by adding at the end the following new chapter:

   Inserted: "CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS

   Inserted: "Sec. 5000A. Stock compensation of insiders in inverted corporations.

   Inserted: "SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS.

   Inserted: "(a) Imposition of Tax.--In the case of an individual who is a disqualified individual with respect to any inverted corporation, there is hereby imposed on such person a tax equal to 20 percent of the value (determined under subsection (b)) of the specified stock compensation held (directly or indirectly) by or for the benefit of such individual or a member of such individual's family (as defined in section 267) at any time during the 12-month period beginning on the date which is 6 months before the inversion date.

   Inserted: "(b) Value.--For purposes of subsection (a)--

   Inserted: "(1) In general.--The value of specified stock compensation shall be--

   Inserted: "(A) in the case of a stock option (or other similar right) or any stock appreciation right, the fair value of such option or right, and

   Inserted: "(B) in any other case, the fair market value of such compensation.

   Inserted: "(2) Date for determining value.--The determination of value shall be made--

   Inserted: "(A) in the case of specified stock compensation held on the inversion date, on such date,

   Inserted: "(B) in the case of such compensation which is canceled during the 6 months before the inversion date, on the day before such cancellation, and

   Inserted: "(C) in the case of such compensation which is granted after the inversion date, on the date such compensation is granted.

   Inserted: "(c) Tax To Apply Only if Shareholder Gain Recognized.--Subsection (a) shall apply to any disqualified individual with respect to an inverted corporation only if gain (if any) on any stock in such corporation is recognized in whole or part by any shareholder by reason of the acquisition referred to in section 7701(a)(4)(B)(ii)(I) with respect to such corporation.

   Inserted: "(d) Exception Where Gain Recognized on Compensation.--Subsection (a) shall not apply to--

   Inserted: "(1) any stock option which is exercised on the inversion date or during the 6-month period before such date and to the stock acquired in such exercise, and

   Inserted: "(2) any specified stock compensation which is sold, exchanged, or distributed during such period in a transaction in which gain or loss is recognized in full.

   Inserted: "(e) Definitions.--For purposes of this section--

   Inserted: "(1) Disqualified individual.--The term 'disqualified individual' means, with respect to a corporation, any individual who, at any time during the 12-month period beginning on the date which is 6 months before the inversion date--

   Inserted: "(A) is subject to the requirements of section 16(a) of the Securities Exchange Act of 1934 with respect to such corporation or any member of the expanded affiliated group which includes such corporation, or

   Inserted: "(B) would be subject to such requirements if such corporation or member were an issuer of equity securities referred to in such section.

   Inserted: "(2) Inverted corporation; inversion date.--

   Inserted: "(A) Inverted corporation.--The term 'inverted corporation' means any corporation to which section 7701(a)(4)(B) applies. Such term includes any predecessor or successor of such a corporation.

   Inserted: "(B) Inversion date.--The term 'inversion date' means, with respect to a corporation, the date on which the corporation first becomes an inverted corporation.

   Inserted: "(3) Specified stock compensation.--

   Inserted: "(A) In general.--The term 'specified stock compensation' means payment (or right to payment) granted by the inverted corporation (or by any member of the expanded affiliated group which includes such corporation) to any person in connection with the performance of services by a disqualified individual for such corporation or member if the value of such payment or right is based on (or determined by reference to) the value (or change in value) of stock in such corporation (or any such member).

   Inserted: "(B) Exceptions.--Such term shall not include--

   Inserted: "(i) any option to which part II of subchapter D of chapter 1 applies, or

   Inserted: "(ii) any payment or right to payment from a plan referred to in section 280G(b)(6).

   Inserted: "(4) Expanded affiliated group.--The term 'expanded affiliated group' means an affiliated group (as defined in section 1504(a) without regard to section 1504(b)(3)); except that section 1504(a) shall be applied by substituting 'more than 50 percent' for 'at least 80 percent' each place it appears.

   Inserted: "(f) Special Rules.--For purposes of this section--

   Inserted: "(1) Cancellation of restriction.--The cancellation of a restriction which by its terms will never lapse shall be treated as a grant.

   Inserted: "(2) Payment or reimbursement of tax by corporation treated as specified stock compensation.--Any payment of the tax imposed by this section directly or indirectly by the inverted corporation or by any member of the expanded affiliated group which includes such corporation--

   Inserted: "(A) shall be treated as specified stock compensation, and

   Inserted: "(B) shall not be allowed as a deduction under any provision of chapter 1.

   Inserted: "(3) Certain restrictions ignored.--Whether there is specified stock compensation, and the value thereof, shall be determined without regard to any restriction other than a restriction which by its terms will never lapse.

   Inserted: "(4) Property transfers.--Any transfer of property shall be treated as a payment and any right to a transfer of property shall be treated as a right to a payment.

   Inserted: "(5) Other administrative provisions.--For purposes of subtitle F, any tax imposed by this section shall be treated as a tax imposed by subtitle A.

   Inserted: "(g) Regulations.--The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.".

   Inserted: (b) Denial of Deduction.--

   Inserted: (1) In general.--Paragraph (6) of section 275(a) is amended by inserting "48," after "46,".

   Inserted: (2) $1,000,000 limit on deductible compensation reduced by payment of excise tax on specified stock compensation.--Paragraph (4) of section 162(m) is amended by adding at the end the following new subparagraph:

   Inserted: "(G) Coordination with excise tax on specified stock compensation.--The dollar limitation contained in paragraph (1) with respect to any covered employee shall be reduced (but not below zero) by the amount of any payment (with respect to such employee) of the tax imposed by section 5000A directly or indirectly by the inverted corporation (as defined in such section) or by any member of the expanded affiliated group (as defined in such section) which includes such corporation.".

   Inserted: (c) Conforming Amendments.--

   Inserted: (1) The last sentence of section 3121(v)(2)(A) is amended by inserting before the period "or to any specified stock compensation (as defined in section 5000A) on which tax is imposed by section 5000A".

   Inserted: (2) The table of chapters for subtitle D is amended by adding at the end the following new item:

   Inserted: "Chapter 48. Stock compensation of insiders in inverted corporations.".

   Inserted: (d) Effective Date.--The amendments made by this section shall take effect on July 11, 2002, except that periods before such date shall not be taken into account in applying the periods in subsections (a) and (e)(1) of section 5000A of the Internal Revenue Code of 1986, as added by this section.

   Original wording

   Strike sections 341 and 342 of the bill and insert:

Read automatically from the Congressional Record. Check the original before relying on it.

As printed